3 Top Canadian ETFs to Buy for Instant Diversification

These ETFs offer Canadians exposure to some of the highest-quality companies in the world, making them three of the top funds to buy now.

Daniel Da Costa

Daniel joined the Motley Fool Canada team in 2019 with years of experience in banking and investing. Growing up the son of a proprietary stock trader and educator, Daniel’s always found joy in helping Canadians to improve their financial situations. With the Motley Fool, Daniel sees an even more rewarding way to impact Canadians positively. A student and great admirer of Warren Buffett, he’s always looking for investments offering growth at a reasonable price. Outside of finance, Daniel enjoys spending his time with family, sailing, and watching Formula One.

Published January 21, 3:30 pm EST

Building a well-diversified portfolio is one of the most important steps investors can take to reduce risk and improve long-term returns. However, although picking individual stocks can be rewarding when you hit the mark, it’s also more difficult, requiring a lot more research, ongoing monitoring, and a higher tolerance for volatility. That’s why many Canadian investors prefer to buy the top ETFs on the TSX.

ETFs are some of the best investments that retail investors can consider because a single investment allows you to gain exposure to dozens or even hundreds of companies, instantly spreading your risk across sectors, industries, or even entire markets.

Of course, not all ETFs are created equal. Just like with individual stocks, it’s important to choose high-quality ETFs that provide exposure to strong businesses, attractive long-term trends, and reliable markets.

So, with that in mind, if you’re a long-term investor who’s looking to instantly diversify your portfolio with reliable ETFs, here are three top Canadian funds to buy right now.

ETF stands for Exchange Traded Fund — Source: Getty Images

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One of the top ETFs that Canadian investors can buy and hold long term

If you’re looking to buy top Canadian ETFs to build a reliable long-term portfolio, there’s no question that the iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP) is one of the first you should consider.

The XSP ETF is unquestionably one of the best and easiest ways for Canadian investors to diversify their portfolios by gaining exposure to the U.S. market.

Diversification isn’t just about spreading your capital across different stocks, ETFs, or industries. It’s also about diversifying geographically, and for Canadian investors the best and simplest way to do that is to gain exposure to the S&P 500.

That’s why the XSP, which tracks the S&P 500, is one of the top ETFs that Canadian investors can buy. It includes many of the largest and most dominant businesses in the world across sectors like technology, healthcare, consumer goods, and financials.

In addition to offering exposure to the U.S. economy and some of the best businesses in the world, another key benefit of the XSP ETF is that it offers exposure to U.S. stocks while hedging currency risk.

That’s a crucial advantage because it can significantly reduce risk and volatility caused by fluctuations between the Canadian and U.S. dollars, making it a more stable option for investors who want U.S. exposure without taking on additional currency swings.

Currently, the XSP ETF offers a yield of roughly 1.3% and charges a management expense ratio of just 0.09%.

A top fund for exposure to Canada’s blue-chip stocks

In addition to the XSP, another index fund and top ETF that Canadian investors will want to buy and hold for the long haul is the iShares S&P/TSX 60 Index ETF (TSX: XIU).

The XIU is easily one of the best choices for investors who want exposure to the largest and most dominant companies in Canada.

Unlike the XSP, which tracks a large number of American stocks, the XIU tracks the S&P/TSX 60 Index, giving investors exposure to Canada’s largest companies across sectors like financials, energy, materials, and industrials.

These are many of the same blue-chip stocks that dominate Canadian dividend and long-term growth portfolios. That means the XIU is a more reliable ETF with a higher yield than some of its peers. However, it also means it’s a fund you buy for consistent long-term growth, not rapid rallies.

Today, the XIU offers a current yield of 2.4% and charges a MER of just 0.18%.

One of the best ETFs to buy for exposure to gold

While diversification is essential to reducing risk, and broad-based funds are often the easiest way to achieve it, another option investors can use to help mitigate risk is gaining exposure to gold.

That’s why one of the top Canadian ETFs to add to your buy list today is the iShares S&P/TSX Global Gold Index ETF (TSX: XGD).

The XGD is one of the best ways to gain exposure to gold prices, since it owns a portfolio of gold mining companies. These companies can perform well during inflationary environments, geopolitical uncertainty, or market volatility.

So, if you’re looking to buy reliable Canadian ETFs you can own for the long haul with confidence, the XGS is certainly a top choice.